Faraglia, E., Marcet, A., Oikonomou, R., Scott, A.

A Short Note on Optimal Debt Management under Asymmetric Information

CWPE1761

Abstract: We show that under asymetric information, if the government holds advanced information relative to the investors.some debt management policies may lead to bond market instability. The In particular, we show that the repurchase/reissuance strategy assumd in most of the current debt management literature would cause such a crisis and it would be therefore highly suboptimal.of a bond below its maturity this does compromise the ability of long bonds to provide fiscal insurance.

Author links: Elisa Faraglia  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1761.pdf

Open Access Link: https://doi.org/10.17863/CAM.37456

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